Thinking About Retiring? Avoid These 5 Common Mistakes!
Are you ready to retire?
Great!
Why?
Because you're turning 65 this year? Or 70? Or 75?
Because you've hit your "retirement number" and you feel good about your nest egg?
Because you like how the markets are performing?
Because you finally paid off your mortgage?
All these factors can contribute to a positive retirement transition. But none of them should "trigger" a rush into retirement either. Even if you're retiring in the right time frame, you could move too quickly and make some of these common mistakes that planning ahead with an advisor could help you avoid.
Mistake #1: Retiring Without a Spending Plan
It's true that, for most seniors, monthly spending dips at the beginning of retirement. You won't be commuting to work or refreshing your professional wardrobe. You'll (hopefully!) be done paying for your kids' college and other expenses. You and your spouse might even consider downsizing to reduce your monthly expenses even more.
But what about your travel plans? Hobbies? Dues to join your local country club? Home or vehicle upgrades to keep you safe and comfortable?
Depending on your retirement goals and how you're planning to fill all that time without work, these costs could equal or even eclipse what you save as a retired empty nester.
And if you spend too much too soon, you might not have the resources you’ll need to secure the care you want at the end of retirement, when seniors typically experience a spike in health care spending.
Instead:
Build a comprehensive retirement budget: Separate your "needs" (housing, food, healthcare, utilities, transportation) from your "wants" (hobbies, travel, dining out, charitable giving) and set realistic spending limits.
Stress test your plan: Do some back-of-the-napkin math. How does your plan hold up if the markets dip? If you or your spouse has an expensive healthcare emergency? If the old boiler in the basement needs to be replaced? If you decide you want to contribute to a grandchild's education?
Factor in inflation: No matter what else happens in the world, the markets, or your life, your purchasing power is going to dip by around 3% every year. Plan ahead for known variables!
Mistake #2: Claiming Social Security Without a Strategy
Most seniors can start taking Social Security at age 62. Some folks take their benefits as soon as possible to fund an early retirement goal or fill another financial need. Others don't want to wait because they worry the Social Security trust fund will run out of money before they maximize their benefits.
While there are circumstances where taking Social Security early is the best option for a financial plan, folks who do wait until full retirement age (67 for folks born after 1960) will see their benefits increase by 30%, and then another 8% per year until age 70. Married couples who grab their benefits right away might fail to coordinate their survivor's benefits into a valuable safety net. Mistiming Social Security benefits can also trigger some unintended tax liability.
Instead:
Model different claiming ages: A financial advisor can help you analyze how claiming Social Security at various ages affects your total lifetime benefits and your overall financial plan.
Coordinate with your spouse: Delaying and maximizing Social Security for the higher-earning spouse is one common strategy for getting the most out of your combined benefits.
Factor in longevity risks: Healthy seniors with no red flags in their family histories might delay Social Security as long as possible. Folks dealing with terminal illnesses might need their benefits now.
Analyze your taxable income: Up to 85% of your Social Security benefits could be taxable depending on your income from other sources for a given year.
Mistake #3: Going All-In (or All-Out) on the Market
Shifting your portfolio towards more conservative investments (such as bonds and high-yield savings accounts) is a common pre-retirement strategy.
But some seniors become so risk-averse as they age that they try to get out of the markets entirely, especially if the markets are going through a correction.
Others treat their nest eggs like jackpots and overexpose their portfolios to volatility. Even worse, some try to "Invest like a billionaire!" and put their money into "Can't Lose!" products they see advertised on cable news and social media.
Instead:
Use a diversified retirement income portfolio: A healthy retirement portfolio is designed to provide income for today's needs while also generating growth for tomorrow. Work with an advisor to find the right mix of diversified investments and cash holdings.
Match assets to time horizons: Short-term cash (1-3 years of living expenses) should usually be in liquid, stable accounts. Money for the mid-term (3-10 years) might come from less volatile fixed income (including your Social Security benefits). Long-term money (10+ years out) can remain in growth-oriented assets like stocks.
Consider an income flooring or bucket strategy: Establish "buckets" of savings to cover specific needs, such as 3 years of your annual expenses or emergency health care services Medicare doesn’t cover.
Mistake #4: Ignoring Retirement Tax Planning
Tax planning doesn't get any simpler when you stop collecting a monthly paycheck.
For many seniors, taxes become even more complicated because they could be receiving annual income from a wider variety of sources (Social Security, pensions, brokerage accounts, tax-deferred accounts), each with its own rules around tax liability.
It's also not unusual for an affluent senior to be earning close to their pre-retirement income, or more. Without careful budgeting and distribution planning, you might get bumped into a higher tax bracket, which can also drive up taxes on your Social Security benefits and monthly Medicare premiums.
Instead:
Plan Roth conversions in low-income years: If you, your advisor, and your tax professional anticipate your income will be lower in a given year, you could make a Roth IRA conversion at a lower tax rate. Future withdrawals from your Roth IRA will be tax-free.
Optimize withdrawal order: For most seniors, it's best to start making withdrawals from taxable accounts first, then supplement with IRA distributions at least up to the bottom two tax brackets making sure to account for your Roth conversion strategy in your strategy.
Utilize Qualified Charitable Distributions (QCDs): In 2025, seniors aged 70½ and older who have major giving goals can direct up to $108,000 directly from an IRA to a qualified charity. QCDs count towards your required minimum distributions and are excluded from your taxable income.
Mistake #5: Retiring Without a Clear Purpose
Even retirees who never loved their jobs are often a little rattled on their first Monday morning without work. After decades of focusing so much time and energy on your career, retirement completely upends how you spend your time every day and who you spend it with. Seniors who strongly identify with their jobs and their professional responsibilities might suffer a real crisis of identity and lack of purpose. And married couples who haven't spent whole days together in years might tiptoe around each other's routines and feel less connected.
Instead:
Create a “Life Portfolio”: Just as you diversify your financial assets, diversify your life among your roles in retirement: spouse, grandparent, friend, mentor, volunteer, artist, athlete, student, world traveler.
Plan your time intentionally: A round of golf with your buddies or a night out with your spouse doesn’t just "happen" because you have more free time. Schedule social experiences that will keep you connected and explore hobbies and interests that will give you something interesting and meaningful to do every day.
Experiment: You might not get your retirement schedule right the first time. Be open to new experiences and fine-tune your days to find the right mix of structure, community, and purpose.
Keen Wealth's comprehensive planning process isn't just error prevention. My team is skilled at helping you prepare for the emotional and financial side of retirement as well.
Make an appointment to visit our office and we’ll discuss retirement issues you might be overlooking as well as the goals that are central to your retirement vision.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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